Germany is soon to be the first European nation to legally recognize a third gender in cases of babies born with ambiguous genitalia. No longer will newborns be rigidly assigned male or female.

The law, designed to fight discrimination, will go into effect Nov. 1, according to Der Spiegel. Parents of children born with both sex characteristics will be allowed to opt out of determining their baby's gender and to wait until later in life.

Or they may never officially declare a gender, leaving the child "undetermined" or "unspecified" on their birth certificates.

An estimated 1 in 2,000 children born each year is neither boy nor girl -- they are intersex, part of a group of about 60 conditions that fall under the diagnosis of disorders of sexual development (DSD), an umbrella term for those with atypical chromosomes, gonads (ovaries and/or testes), or unusually developed genitalia.

Today, gender identification is still not well understood, but most experts in the United States say that when sex cannot be determined, it's better to use the best available information to assign gender, then to wait and monitor the child's psychological and physical development before undertaking surgery, if at all.

New York City psychiatrist Dr. Jack Drescher, who specializes in issues of gender identification, said the new German law "sounds like a good thing."

"Some people have life-endangering conditions that require surgery, but most kids do not," he said. "You can make a gender assignment without surgery and then see how identity develops. The science of knowing how a child will develop any gender identity is not very accurate.... Nobody can answer the questions about why this happens. It's like the mystery of why people are gay."

A report filed to the European Commission in 2011 described intersex people as "differ[ent] from trans [sexual or gender] people as their status is not gender related but instead relates to their biological makeup (genetic, hormonal and physical features) which is neither exclusively male nor exclusively female, but is typical of both at once or not clearly defined as either.

"These features can manifest themselves in secondary sexual characteristics such as muscle mass, hair distribution, breasts and stature; primary sexual characteristics such as reproductive organs and genitalia; and/or in chromosomal structures and hormones."

The report also gives an overview of the discrimination faced by intersex and transgender people in the realm of employment, as well as levels of harassment, violence and bias crimes.

Already, Australia and Nepal allow adults to mark male, female or a "third gender" on their official documents. In June, a 52-year-old Australian, Norrie May-Welby, became the world's first recognized "genderless" person after winning a legal appeal to keep an "unspecified" gender status for life.

But German law has not clarified if it will apply to passports and other forms of identification.

In neighboring France, gender issues are still controversial, according to a news report in France 24.

In 2011, dozens of French lawmakers from that strongly Catholic country signed a petition for "gender theory" to be withdrawn from school textbooks.

The U.S. website Catholic Online has also opposed the German law, writing that "(a)s the world is being dragged into a new state, where gender is a choice, but sexual activity is not, we reverse two more pillars of civilization."

One Maryland mother of a newborn also told the Baby Zone that she would rather see babies assigned gender at birth.

"Parenting is stressful enough without extra limitations especially if you don't know the gender of your child," she told the parenting website. "Children need stability and certainty."

Historically, children born with both male and female genitalia were called hermaphrodites, named for the handsome Greek god who had dual sexuality. And as little as a decade ago, the medical community thought of gender as a slate that could be erased and then redrawn.

But now, many are challenging the ethical basis of surgery, knowing that gender identity is complex, and doctors can sometimes get it wrong, not knowing how a child will feel about their gender assignment when they grow up.

"Back in the middle of the 20th century, it was called a 'psychiatric emergency,'" said Drescher. "When these kids were born, you didn't call the psychiatrist, you called a surgeon."

The prevailing theory on how to treat children with ambiguous genitalia was put forward by Dr. John Money at Johns Hopkins University, who held that gender was malleable. He coined the term "gender identity" and argued that social and environmental cues -- how parents raised a child -- interacted with a child's genes and hormones to shape whether the person identified as male or female.

But in one 1966 case, known as "John/Joan," his theories became controversial. He advised the parents of a boy whose penis had been severed in a botched circumcision to have the child fully castrated, removing his testicles, as well, and to raise him as a girl.

"Money presented the case as a successful case of transition, but it was not," said Drescher. "When the boy was around 15, he transitioned back to a boy and married a woman. But at 38, he committed suicide."

Drescher said that today, some doctors are still "practicing that model." But in the 1990s with the advent of the Internet, survivors of these gender surgeries came forward, "not happy with the outcome."

Such was the case with Jim Bruce, a 36-year-old writer from Montana, who was born with XY male chromosomes but ambiguous genitals. Doctors couldn't be sure if he had a large clitoris or a small penis and were convinced he could never live a "satisfactory life" as a man.

So shortly after his birth in 1976, Bruce's external organ and testes were surgically removed and he was raised as a girl. He was given female hormones at age 12.

"I knew that I wasn't a girl," he told ABCNews.com. "I was unhappy, but it was really difficult to ask questions."

At 18, he was set for a vaginoplasty. But depressed and knowing something was wrong, he demanded medical records. What he found out was horrifying. "I was sterilized at birth -- and no one ever told me."

Bruce was born with a DSD that prevented his body from producing enough testosterone to properly develop his genitals. After learning the truth, he transitioned back to a man, taking testosterone shots and having his breasts removed. Surgery rendered him infertile.

Today, he advocates for others in an organization called the Interface Project, trying to normalize perceptions of those who are intersex.

But Anne Tamar-Mattis, executive director for California-based legal group Advocates for Informed Choice, is concerned that the German law "invites labeling and stigma."

"A lot of activists are concerned that what the German rule will do is encourage parents to make quick decisions and give the child an 'undetermined,'" she said. "We are afraid it will encourage intervention. We think a better process is assigning male or female sex, then waiting. But we haven't seen how the law will play out, so all we can do is speculate."

Tamar-Mattis said that her organization supports the Australian law because "it allows adults to choose to be recognized in a third gender."

"Adults should be able to make their own decisions about legal gender," she said. "German law is about assigning it at birth. That is not a battle young children should have to take up at this point. When they are grown, they can make decisions about their own bodies."

But Dr. Arlene Baratz, a Pittsburgh breast radiologist who has a daughter with a disorder of sexual development and helps hundreds of others in a support group, said the German law will "empower" both parents and children.

Baratz's daughter Katie was born with male chromosomes, but has a DSD called complete androgen insensitivity syndrome (cAIS). Because her androgen receptors are faulty, Katie developed female characteristics. She has a vagina, but no uterus or ovaries. When she was 6, doctors discovered small testes in a hernia sac.

Today, at 29, Katie is married and at the University of Pennsylvania, a resident in child psychiatry. Though she is infertile, she hopes to become a parent through adoption or gestational surrogacy.

"The law gives parents some space not to have to rush into making decisions themselves," said Baratz. "It gives them the time to do some tests and figure it out and a period of time before they write 'male' or 'female.' This way, you are OK -- raise the child, love the child. You have a wonderful baby and enjoy the fun. We don't have to rush into surgery that is irreversible."

"It brings the children into the decision and takes away the anxiety that motivates parents because they don't feel they are doing the right thing," she said. "Ultimately, the child will decide which sex he or she feels more comfortable with -- and that's a wonderful thing. It empowers children to make the decision for themselves."